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Published United States Court of Appeals For The Fourth Circuit
Published United States Court of Appeals For The Fourth Circuit
BRIEF: Robert G. Mayer, ROBERT G. MAYER, P.C., Fairfax, Virginia, for Appellant.
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OPINION
MICHAEL, Circuit Judge:
Quy Van Nguyen, a Chapter 7 debtor domiciled in the Commonwealth of Virginia, was required to adhere to Virginia's bankruptcy
exemption scheme. The trustee in the bankruptcy proceeding
objected, on grounds of untimeliness, to Nguyen's claim for a homestead exemption. The bankruptcy court denied the objection, and the
district court affirmed. We also affirm, holding (1) that Virginia law,
not the Federal Rules of Bankruptcy Procedure, controls the computation of the time allowed a Virginia debtor to claim a homestead
exemption and (2) that under Virginia law a debtor has "set apart"
property claimed as exempt once he has delivered a properly executed
homestead deed, with fees paid, to the appropriate clerk.
I.
The facts are undisputed. Quy Van Nguyen filed for Chapter 7
bankruptcy in the Eastern District of Virginia on August 29, 1997. In
his Schedule C, Nguyen claimed the following property as exempt
from the bankruptcy estate: his clothing valued at $500, his watch at
$20, and his 1992 Acura automobile at $6,000. The first meeting of
creditors was held on the date initially set, October 1, 1997. During
the meeting the trustee reviewed Nguyen's petition and schedules,
including his Schedule C. That same day (October 1, 1997) Nguyen
took steps to perfect his exemption on the automobile by executing
a homestead deed and mailing it with a check for recording fees to
the Clerk of the Fairfax County, Virginia, Circuit Court by certified
mail, return receipt requested. Although the deed was received by the
clerk on Friday, October 3, 1997, it was not date-stamped as admitted
to record until Tuesday, October 7, 1997. The trustee objected to the
homestead exemption, arguing that the failure to admit the deed to
record within five days of the date initially set for the first meeting
of creditors made the exemption claim untimely under the Virginia
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property claimed as exempt one day too late. The trustee concedes,
however, that if the Federal Bankruptcy Rules, rather than Virginia
law, determine the computation of the five days, Nguyen's exemption
was timely claimed. See Fed. R. Bankr. P. 9006(a) (excluding Saturdays, Sundays, and legal holidays from computation of time when
period prescribed or allowed is shorter than eight days). Thus, the
threshold question is one of choice of law. Normally, of course, the
federal courts apply federal procedural law whether they are deciding
state or federal questions. That has not always been the case. From
1789 until 1938 federal courts in actions at law applied the procedural
rules of the states where they were seated. See Process Act of 1789,
c. 21, 2, 1 Stat. 93 (Sept. 29, 1789); Act Aug. 23, 1842, c. 188, 6,
5 Stat. 516, 518; Act June 1, 1872, c. 255, 5, 17 Stat. 197; 4 Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure
1002 (2d ed. 1987).3 Not until the adoption of the Federal Rules of
Civil Procedure in 1938 was the federal practice of conformity with
relevant state procedure replaced by a system of uniform federal procedure. Still, in the few instances where it sees fit, Congress may
bypass the federal rules and require the federal courts to apply state
procedure. See, e.g., Fed. R. Evid. 601 (competence of witnesses in
certain civil proceedings determined by state law). As we will
explain, Congress has opted for conformity with state procedure when
bankruptcy exemptions are claimed under state law. The Virginia rule
for computing time therefore governs.
By its own terms Bankruptcy Rule 9006 determines the computation of "any period of time prescribed by . . . any applicable statute."
Fed. R. Bankr. P. 9006(a). In addition, Rule 1001 states that the Bankruptcy Rules "govern procedure in cases under Title 11 of the United
States Code." Fed. R. Bankr. P. 1001. Standing alone, this language
would seem to resolve the controversy. However, Section 522(b) of
the Bankruptcy Code permits a state to opt out of the federal scheme
of exemptions provided in section 522(d), in which case the exemptions available to a debtor are specified by state law. The longstanding
consensus in this circuit is that when Congress allowed the states to
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3 Uniform rules of procedure for federal equity cases were not promulgated until 1822. See Process Act of 1792, c. 36, 2, 1 Stat. 275, 276
(May 8, 1792); 4 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure 1002 (2d ed. 1987).
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ors in North Carolina depend on state law for both substance and procedure); In re Swift, 96 F. Supp. at 46 (holding that Virginia statute
limiting time to set apart homestead exemption permissibly regulated
procedure in bankruptcy). But cf. Matter of Crowell, 138 F.3d 1031,
1035 (5th Cir. 1998) (holding that the Bankruptcy Code "should not
be understood to force bankruptcy courts to use state-law procedures
and state-law actors" to determine what portion of a debtor's real
property is an exempt homestead). Moreover, the meaning of the procedural rules for claiming an exemption must be determined by reference to state law. See Morgan, 389 F.2d at 472; LaFortune v. Naval
Weapons Ctr. Fed. Credit Union, 652 F.2d 842, 846 (9th Cir. 1981).
We therefore look to Virginia law to decide how to count the days
in applying the term "set . . . apart on or before the fifth day" in Va.
Code Ann. 34-17. The answer is clear. Virginia law provides that
in computing a prescribed period of five days, intervening Saturdays,
Sundays, and legal holidays are included. See Va. Code Ann. 113.3, 1-13.3:1; In re Bernstein, 189 B.R. 113, 114-15 (Bankr. W.D.
Va. 1995); In re Haynesworth, 145 B.R. 222, 226 (Bankr. E.D. Va.
1992). This means that the debtor in this case had five days from
Wednesday, October 1, 1997, to "set apart" his automobile. Because
the intervening Saturday and Sunday must be counted, his time
expired on Monday, October 6, 1997. We must therefore decide
whether the debtor met the October 6, 1997, deadline.
III.
As we have already said, a debtor must set apart any property
claimed under the homestead exemption no later than the fifth day
after the date initially set for the creditors meeting required by 341
of the Bankruptcy Code. See Va. Code Ann. 34-17. In addition to
establishing this time limit for setting apart personal property claimed
as exempt, Virginia law also provides the process for claiming the
exemption. The personal property selected for exemption by the
debtor
shall be set apart in a writing signed by him. He shall, in the
writing, designate and describe with reasonable certainty the
personal estate so selected and set apart each parcel or article, affixing to each his cash valuation thereof. Such writing
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day after the date initially set for the 341 creditors meeting. See Va.
Code Ann. 34-17. Although neither the statute nor Virginia case law
provides any direct guidance on the meaning of "set apart," we find
some direction in the language of 34-14. That section, captioned
"How set apart in personal estate; form to claim exemption of personal property," requires that the property claimed as exempt "be set
apart in a writing signed by [the debtor]." Va. Code Ann. 34-14.
After prescribing the form and content of the writing, 34-14 states
that it "shall be admitted to record, to be recorded as deeds are
recorded." Thus, 34-14 imposes two distinct requirements: (1) the
debtor must describe the property in a particular writing and (2) the
writing must be admitted to record.
Because 34-14 uses the passive voice ("shall be admitted to
record"), it does not say who ultimately bears the obligation to see
that the homestead deed is in fact admitted to record. The trustee has
argued that this obligation falls exclusively on the debtor. We disagree. Of course, the deed cannot be admitted to record, and the statute cannot be complied with, unless the debtor files the deed in the
proper form with the proper clerk. Once the debtor has done that,
however, the duty to "admit[ ] [the writing] to record, to be recorded
as deeds are recorded" is exclusively the duty of the clerk. As the Virginia Supreme Court observed in a case where the buyer had delivered his deed (for 500 acres) to the clerk for recording and the clerk
misplaced the deed:
The words in [the 1819 act regulating conveyances], "and
recorded according to the directions of this act," . . .
impose[ ] no farther duty on the vendee in order to protect
and secure his title. Nor would that construction be tolerated, which would make it depend on the acts or omissions
of the clerk over whom he has no control, and with whom
the law compels him to deposit his deed. A different construction would be attended with great mischief. The act
having prescribed no time to the clerk to record a deed by
spreading it on the record, its validity would be fluctuating
and uncertain, and the object of the act defeated.
Beverly v. Ellis, 22 Va. 46, 48, 1 Rand. 102, 106-10 (1822). Cf. also
Virginia Bldg. & Loan Ass'n v. Glenn, 39 S.E. 136, 140 (Va. 1901)
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("[Grantee] had done all the law required when its deed was left with
the clerk for recordation and in a condition to be recorded."); Thomas
v. Stuart's Ex'r, 22 S.E. 511 (Va. 1895) (holding that grantee who
"delivered the deed in proper form, duly and legally acknowledged,
to clerk of proper office for recordation" had done "all he could do,
and all the law required him to do," and deed would not be voided by
clerk's mistake in transcription).
Identical concerns are present in this case, where Nguyen filed his
homestead deed with the proper clerk three days before the statutory
deadline. Because the homestead exemption statute also "prescribes
no time to the clerk to record a deed," allowing the validity of the
exemption to depend on the diligence and speed of the clerk would
impose unfair burdens on debtors. Indeed, it would undermine the
homestead exemption's beneficent goal of insuring"an unfortunate
debtor and his equally unfortunate, but more helpless, family a means
of shelter and a measure of existence." Goldburg Co. v. Salyer, 50
S.E.2d 272, 274 (Va. 1948). Furthermore, once a properly filed deed
has been submitted to the clerk, admission to record is a purely ministerial task. The clerk has no discretion to refuse to admit a properly
filed deed to record. See Va. Code Ann. 17.1-223 (describing duty
of clerk to record writings that satisfy certain formalities); Fooshee v.
Snavely, 58 F.2d 774, 777 (4th Cir. 1932) ("Had the deed been properly presented for recordation, it would have been the duty of the
clerk at once to admit it to the record, and no act of the clerk would,
in any way, have affected that fact.") (dictum).
In construing 34-14, we are especially mindful that the purposes
of the recording requirement for homestead exemptions are quite different from the purposes of recording requirements in conveyancing.4
The significance of the recording requirement for homestead deeds
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4 We note that an entirely different provision, Va. Code Ann. 55-96,
governs the recording of instruments that convey an interest in real property. The language of that provision differs significantly from the language of 34-14. Section 55-96 states that any deed or contract
conveying real property "shall be void as to all purchasers for valuable
consideration without notice not parties thereto and lien creditors, until
and except from the time it is duly admitted to record." Va. Code Ann.
55-96.
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this case, Nguyen did all of this, and the bankruptcy and district
courts were correct in allowing his homestead exemption.
The district court's order is
AFFIRMED.
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